RBZ injects US$1.34bn into WBWS forex market

LIVINGSTONE MARUFU

The Reserve Bank of Zimbabwe (RBZ) has injected US$1.34bn into the foreign exchange market over the past two years to support the stability of the Zimbabwe Gold (ZiG) currency, Business Times can report.

The intervention has been channelled through the funding of the Willing-Buyer Willing-Seller (WBWS) foreign exchange arrangement, enabling companies to access hard currency via the formal market.

Details of the intervention are contained in the RBZ’s fourth-quarter monetary, currency, price and financial developments report.

RBZ Governor Dr John Mushayavanhu said the central bank remains vigilant and responsive, carefully calibrating its monetary policy stance to balance price stability with broader economic imperatives.

“Foreign exchange market interventions amounting to US$1.34bn since April 2024 have contributed to the smooth functioning of the foreign exchange market under the WBWS arrangement,” Dr Mushayavanhu said.

Analysts said the intervention, combined with United States dollar sales by companies during the period, has helped sustain industrial activity and production.

Zimbabwe Economics Society (ZES) vice-president Misheck Ugaro told Business Times that the central bank was gradually positioning the WBWS as the preferred platform after starving the parallel market of excess liquidity.

“I think that should be viewed as a strength in the sense of forex availability. It shows the central bank’s ability to support the market. It also shows that the market is growing in self-reliance on the interbank. The total import bill for the country is only supported by US$1.4bn, which is only around 20% of total demand. The ZiG stability is therefore real. Going forward, market confidence will increase,” Ugaro said.

Economist Titus Mukove said most companies are now channelling their foreign exchange needs through the interbank market due to limited liquidity on alternative markets.

“So this has been a strategy that has worked for the central bank since September 2024. And we have seen that the exchange rate has been hovering around ZWG26 to one US dollar. And we have seen the growth in foreign currency reserves, which now cover more than three times the reserve stock to the local ZiG,” Mukove said.

However, Mukove questioned the long-term sustainability of the strategy, noting that it is heavily dependent on the availability of foreign currency reserves.

“You find that the long-term sustainability of this approach is not clear and it’s very much questionable because it relies heavily on foreign currency inflows and reserves. We don’t know what will happen if the reserves are depleted by funding quasi-monetary activities. And there is a need to take caution in addressing this issue of intervention in order to stabilise the local currency,” he said.

Mukove added that effective management of domestic productivity and strict fiscal discipline were critical.

“This ensures that the ZiG, at least in the short term, is stabilising, but the transition to monocurrency actually requires careful planning and an implementation process,” he said.

He said for Zimbabwe to achieve a viable monocurrency system, structural reforms were essential, alongside exchange rate stability to promote economic growth and productivity.

He argued that RBZ interventions are largely short term and that long-term success hinges on how effectively the country manages foreign currency inflows and reserves.

“That would make it sustainable if we were to operate under 100% monocurrency in the long run. So the fundamentals need to be proper for it to be effective both in the short term and in the long run,” Mukove said.

Morgan & Co investment analyst Tafara Mtutu said the central bank was moving in the right direction but stressed the need for stronger fiscal support from Treasury.

“You cannot defend a currency by imposing an exchange rate. Rather, you defend its value by tangible, credible, and real instruments. More needs to be done, but I think most of the outstanding and supporting efforts lie with the fiscal authorities more than the central bank,” Mtutu said.

He noted that the RBZ’s reserve accumulation is heavily reliant on exports, particularly gold and tobacco.

“These are exogenous factors working in our favour, gold prices and La Niña, especially, but if things change this will not be sustainable. We need to be in a position where current export levels can be maintained regardless of exogenous circumstances,” Mtutu said.

“This includes reindustrialisation, improving business conditions for multinational corporations, creating a conducive investment environment for international capital, and better laws and corporate governance practices, among other things.”

Another economist Eddie Cross said the relative stability of the ZiG was largely a function of its scarcity, which has, paradoxically, entrenched dollarisation.

“The policies of RBZ have kept ZiG relatively stable for the past 14 to 16 months due to the restriction of ZiG supply in the market. This has created problems for many people not accepting it. The usage of US$ has increased and we are more dollarised than we were at the ZiG experiment,” Cross said.

“The monocurrency transition will require more radical and stronger policies by the RBZ. I don’t see the 100% ZiG economy sustainable in the long run,” he added.

Yet another economist Tony Hawkins said: “If you add the RBZ exchange rate subsidies to the accumulated domestic market arrears, these must be 5% to 7% of GDP, which is unsustainable. The country is increasingly dependent on the gold price. If and when the gold bubble bursts, it will be very messy.”

The apex bank continued to build foreign currency reserves into the fourth quarter of 2025.

Foreign currency reserves rose to US$1.2bn in December 2025, covering about six times the stock of ZiG reserve money. The level of reserve coverage is seen as critical for the lasting stability of the local currency.

Vince Musewe, another economist, said the market’s preference for the United States dollar, rather than confidence in the ZiG, explains the current stability.

“The ZiG is stable because of low demand and continued high preference of the US$. That is not about to change as it is a subordinate currency only used by citizens to pay for power and rates,” Musewe said.